2012 Payroll Tax Cut Extension Act
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Congress agreed to leave a little more money in your pocket and less in the government’s.
Earlier this year in February 22, 2012, President Obama signed into law an extension of the payroll tax cut. As of March 1, 2012, and extending through December 31, 2012, your FICA payroll taxes will continue to be subject to the 4.2% rate that was put in place in January 2011. Unless Congress extends the lower rate again, the rate will return to 6.2% on January 1, 2013.
Currently we can expect that negotiations continue whether to extend the president’s signature payroll tax cut as part of any fiscal cliff deal for 2013.
Sen. Bob Casey D-Pa said the payroll tax cut has a proven track record of job creation and economic growth, which will help deal with the billions in expiring tax cuts and automatic spending reductions, known as the fiscal cliff, set to begin going into effect next year. (Sanchez)
The payroll tax cut extension is expected to help contribute to the country’s economic recovery by putting money back into the hands of the consumers, whose spending accounts for approximately two-thirds of the economy.
This tax cut benefits 160 million working Americans, saving the average worker $1,000 in tax breaks over the year.
Those earning $50,000 a year will save around $80 a month. High-end earners will save a maximum of $2,200. The extension does not affect the 10.4% Self-Employment Contributions Act (SECA) rate as that was already in place through 2012.
With the extension, for taxable years beginning in 2012, the income tax deduction allowed for one-half of SECA taxes is determined using 59.6% of the OASDI (Old Age, Survivors, and Disability Insurance) tax paid on self-employment income up to $110,100, plus one-half of the OASDI tax paid on self-employment income in excess of $110,100, plus one-half of the hospital insurance (HI) portion.
Sanchez, H. (2012, December 5) Democrats Divided Over Payroll Tax Cut Extension. Retrieved from www.rollcall.com